Property taxes can disappear for an alternative plan

Sen. Mike Folmer seen reading part of the Pa. Constitution. He says the document highlights how wrong property taxes are.

Eliminating school property taxes is an elusive — but attainable — goal.

To eliminate these onerous taxes, the challenge is to find nearly $11 billion in replacement revenues and there are four basic alternative taxes to replace school property taxes: Personal Income Tax, Earned Income Tax, Sales & Use Tax and/or a new tax.

In 1965, the General Assembly tried to help schools using the latter approach — new taxes.

These taxes soon became known as “nuisance taxes” that added to taxpayers’ burdens: amusement taxes, business gross receipts and business privilege taxes, mercantile taxes, occupational privilege taxes, per capita taxes and real estate transfer taxes.

During the past decade, another option to eliminate school property taxes was developed: expand the sales tax base.
This plan works because people ha
ve some control over paying sales (consumption) taxes, more pay these taxes than pay property taxes and sales taxes are paid with each purchase (property taxes are lump sums).

My website includes a worksheet that allows citizens to make recommendations on expanding the base and rate(s) of the sales tax. Not surprisingly, people recommend taxing things they don’t like or don’t use, at sometimes high rates.

It’s possible to eliminate school property taxes and reduce the sales tax to 3 percent. However, such an approach would mean taxing every purchase we make.

While many say they would gladly pay more under an expanded sales tax to completely eliminate school property taxes, the list of to-be-taxed items does make you pause.

Most people say such things should continue to be exempted from taxation.
However, every exemption moves you away from the goal of completely eliminating school property taxes. Exemptions also create or perpetuate unfairness as some things are taxed while other (sometimes similar) items are not taxed.

However, as is any tax policy, shifting from one tax to another creates “winners” and “losers.” The conflicts between the two have kept SB 1400 and HB 1776 from moving.

To calculate if you’d benefit from SB 1400, compare what you now pay in property taxes to what you’d need to spend under an expanded 7 percent sales tax.
You would need to spend $14,285.71 in newly taxable items for each $1,000 you now pay in school property taxes.

If you’re now paying $1,000 in school property taxes, you would need to spend $14,285.71 in newly taxable items under a 7 percent sales tax before you would be a net “loser” under the plan. If you now pay $5,000 in school property taxes, you would need to pay $71,428.55 in newly taxable items before being a net “loser.”

For those whose property taxes are $10,000, you would need to spend $142,857.10 to match what you’re now paying in school property taxes.

While some call this plan unfair and/or regressive, I ask: Is there any tax more unfair or more regressive than property taxes?

Pennsylvania’s Constitution says we all have certain “inherent and indefeasible rights,” including “acquiring, possessing and protecting property.”

How can we enjoy these rights if we’re “renting” our property from public schools?

Renting properties is the net effect of the current school property tax system. This is why we need to pass SB 1400 to reach the much-needed, long overdue goal of eliminating school property taxes.